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University of Colorado Denver Business School students (from left) Lou Arellano, Kara Grinnell, Kara Moody, Jonathan Musser and Jeffrey Macco are managing a venture capital fund.

Renee McGaw

When Catherine Kunst joined the University of Colorado Denver’s Bard Center for Entrepreneurship in 2008, she inherited a venture capital fund that hadn’t made an investment in years.

That’s about to change.

The Bard Center is revamping the Rutt Bridges Venture Capital Fund, established in 1998 with a gift from software entrepreneur Rutt Bridges. It now contains about $500,000.

Of the four companies it’s funded in 12 years, only one — Tensegrity Prosthetics of Louisville — is still in business. But Tensegrity provided a road map for how the VC fund might be overhauled.

“In that case, we asked the entrepreneur to get some additional angel funding in addition to ours,” said Kunst, the Bard Center’s executive director. “The idea was with that extra money — some money from us, some money from other community members — it would be enough to push them forward a little bit more. In the other three cases, we were the only investor, and it probably wasn’t enough to get them where they needed to be.”

The fund now is being managed by a team of five UC Denver Business School master’s degree students: Lou Arellano, Kara Grinnell, Jeff Macco, Kara Moody and Jonathan Musser.

They’re getting guidance from Seth Levine, managing director of the Foundry Group, a Boulder-based venture capital fund; Chet Winter, general partner of NewWest Capital Partners, a Denver private equity fund; Betty Arkell, a partner at the law firm of Holland & Hart LLP in Denver; and Craig Harrison, managing partner of Pioneer Ventures and a co-founder of U.S. Capital of Denver.

Having students manage the fund is important, Levine said.

“I felt really strongly that having a fund that was somewhat passively managed by volunteers, like me, was not going to best serve Rutt’s vision or the Bard Center itself, and that integrating it more tightly with the student experience was a better way to go,” Levine said.

For the students, it’s a great opportunity to work with venture capitalists and entrepreneurs.

“To get a foot in that world, and to get to shake hands with some of these people and hear how they think ... it’s really a wonderful opportunity,” Arellano said.

The Rutt Bridges Venture Capital Fund will invest in any industry except real estate, gambling or pornography. Company principals must have some involvement, past or current, with the Bard Center or the University of Colorado Denver.

Initial funding awards are expected to be $25,000, in the form of convertible debt. If the company succeeds, the fund will profit; if not, it risks losing its investment. Companies are expected to secure another source of funding besides the Rutt Bridges fund.

“We don’t take board seats; we don’t want to have that controlling governance part of it,” Moody said. “So [it would be helpful to have] another investor who may or may not sit on the board.”

The revamped fund hasn’t made any investments yet, but is taking applications. The students say they’re prepared to fund startups at various levels of maturity.

“Right now, we’ve got the flexibility to do whatever we really want to, and define this fund in the terms that we want,” Musser said. “So if somebody comes along and has something that’s second or third year but they need more funding and we like what we see, we have the ability to put that in the works. If somebody comes along and has nothing more than a business plan, we can do that too.”

They’re hoping to make at least one investment in 2010, although that depends on finding companies they believe will succeed.

“One thing we agreed upon in the beginning was that we’re not going to invest just to invest. We want to make prudent decisions,” Macco said.

The fund is separate from the Bard Center’s incubator program or its annual business plan competition. That’s by design, Kunst said; it’s easy for advisers to lose their objectivity when it comes to funding companies they’ve helped nurture.

But the students said they’re hoping to see some good prospects among the entrants in this year’s Bard Center business plan competition, which takes place June 10.

“Hopefully the businesses that apply will be big enough and well-rounded enough that we’ll be able to fund one of them,” Grinnell said.

More information about the Rutt Bridges Venture Capital Fund, including how to apply, can be found at: http://thunder1.cudenver.edu/bard/funding.htm.

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